CAPITAL MAINTENANCE AGREEMENT
This Capital Maintenance Agreement (this “Agreement”) is made effective as of the 6th day of February, 2020 (the “Effective Date”), by and between 777 Partners LLC, a Florida-based investment manager (“777”), for the benefit of Merit Life Insurance Co., a Texas life insurance company and affiliate of 777 (“Company”).
WHEREAS, Company is an affiliate of 777;
WHEREAS, 777 wishes to maintain Company’s “total adjusted capital” in an amount at least equal to 350% of Company’s “company-action-level risk-based capital” (as those terms are defined in the insurance laws of the State of Texas as of the Effective Date); and
WHEREAS, 777 and Company desire to enter into this Agreement to provide support to Company in order to allow it to meet its obligations.
NOW THEREFORE, in consideration of the agreements and covenants herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:
1. Capital and Surplus. 777 agrees that it shall cause, at all times during the term of this Agreement, Company to have and maintain “total adjusted capital” in an amount at least equal to 350% of Company’s “company-action-level risk-based capital”, as those terms are defined in the insurance laws of the State of Texas as of the Effective Date. 777 agrees that its undertaking provided herein shall be an absolute, unconditional and continuing obligation during the term of this Agreement.
2. No Guarantee of Indebtedness. This Agreement is not, and shall not be construed as or deemed to constitute, evidence of indebtedness or a direct or indirect guaranty by 777 to any person of the payment of any indebtedness, or of any liability or obligation of any kind or character whatsoever, of Company.
3. Term. This Agreement shall take effect as of the Effective Date. This Agreement may be terminated at any time by written agreement of 777 and Company and upon such termination shall be of no further force or effect; provided, however, except to the extent replaced in accordance with this Section 3 or assigned in accordance with Section 7, this Agreement may not be assigned or terminated without the prior written approval of the Texas Department of Insurance (the “TDI”). Notwithstanding anything herein to the contrary, this Agreement may be terminated in full and 777 shall be released from all obligations hereunder in the event that a replacement capital maintenance agreement on terms substantially similar to this Agreement is provided to Company by another party that has a credit rating or financial strength rating from at least two nationally recognized statistical rating organizations that are the equivalent of a rating of “A-” or higher by Standard & Poor’s Corporation (or its successor) (“S&P”); provided, however, that if such party has a credit rating or financial strength rating from only one nationally recognized statistical rating organization, then such replacement capital maintenance agreement may be provided by such party if such rating is the equivalent of a rating of “A” or higher by S&P.